High-end winemaking as an investment

Opportunities, challenges, return on investment. Conversation with Róbert Szűcs M.D., co-owner of Jammertal Wine Estate.

In the wine industry, just as in any business, the trajectory of a greenfield investment with no previous involvement in the sector cannot be a smooth, straightforward ascent, or am I wrong?

You’re not. Winemaking as an investment is a fairly complex issue. But, in spite of all its decision-making mechanisms, which at first hearing may appear a bit complicated, it can be modelled well. You should keep in mind that the rules of the trade and the reality of the market cannot be ignored. If you disregard them your dreams may go belly up very fast.

Can you give us some examples?

You need to be clear what you want to produce and whom for. This is the basic principle of any production / service company.

First thing is to decide whether you want to get involved in red or white wine production. Each winery puts the main emphasis on one or the other.

Producing white wine in large volumes is a simpler and less risky task than making red wines of similar quality. Accordingly, white wines are a much larger part of the general wine market than reds. Greater quantities of white grapes can be grown per hectares. Picking of white grapes can start significantly earlier than of dark-colored ( black ) grapes so it is less likely that a rainy autumn period would destroy the harvest. This has a strong bearing on the return on investment. It is also true that the average price of white wines is lower because of the relative simplicity of their production and their higher volumes.

If you opt for blue grapes, your next choice is between quickly marketable fresh and matured wines.

Red wines sold 6 to 12 months after their harvest are usually lighter, less complex and not barrel aged. They are referred to as everyday wines. The yield per hectare of the dark-colored  ( black ) grapes used for making those  wines is 50 to 100% higher than for wines destined for ageing.

Everyday wines are usually made from early and mid-season ripening grape varieties common in the Carpathian Basin, such as Blauer Portugieser, Blaufränkish, Kadarka and Zweigelt. You would use late ripening varieties like Merlot and Cabernet for that category only if they grow on a terroir ( the combination of soil, climate and grape variety ) which is not optimal for them thus they would never give you a chance of producing good aged wines.

Aged red wines are a whole different business.

Most decisive and foremost unchangeable factor is time.

The development of grapes cannot be sped up. You should wait for the grape to reach its stage of optimal ripeness and it would always involve high risk. Since you would leave your grapes out in your vineyards three - four weeks longer than average, you should deal with threats of fungal infections  ( caused by a period of foggy and rainy days ) to wasps to starlings ( which could completely erase a hectare of grapes in 3 minutes ).

It ( inherently ) takes years to make aged wines . You would store and age them in barrels for at least 12 to 24 months and another 12 months in bottles.

Another element is volume.

Excellent wines can only be made by growing very low yields of grapes. You can forget about “ big reds “ if your yield exceeds 6,000 Kgs per hectare. The costs of cultivation involved per hectare are irrespective of the yield. It is easy to comprehend the (  price ) difference of end product if you would pick 5,000 Kgs instead of 12,000 Kgs per hectare.

Next one is your production infrastructure.

Processing and storage capacity of the right scale and quality are the keywords which it is not worth starting without.

Last but not least there is the financial aspect.

Great wines have to be pre-financed for years covering all considerable costs involved. You take a risk now and wait for years for the market to acknowledge and like your product. You should be prepared for accepting losses and refusals before you would realize your first successes.

Does this explain the significant price difference between the various types of wines?

For the reasons stated, the price (and enjoyment value) of matured wines is usually much higher than that of mass-produced wines which would reach the market quickly. The rotation speed of cheap wines is much faster. An above average priced wine would require longer time per bottle to sell than a usual one. The point-of-sale options are also limited. You are not supposed to sell a great red on a supermarket shelf with discount.

So, all in all, the high-end wine business is a major economic challenge.

It was not a big surprise that the 2007-08 financial crisis drastically altered the world’s wine market. European Mediterranean was hit hardest, but also globally, the burning need for quick cash had compelled many winemakers to abandon the production of high quality aged wines.

And now we have reached the question of “  for whom “.

Globally, everyday wines take the lion’s share of red wine consumption. They are routinely served with meals, or “ by glass “ wines and spritzer wines. They dominate the shelves of super- and hypermarkets and are priced accordingly.

If you really wish to enjoy everything a complex “ big red “ can give you would need to take your time and retreat to relatively calm surroundings. The primary points of sale for these products are dependable wine shops and good restaurants. Demanding customers often buy them directly from the estate.

Buying high quality wines directly from Jammertal Wine Estate has a number of significant advantages.

Our staff at the Jammertal Visitor Centre in Villány know about their business. They would give you thorough information and answers to questions covering all aspects of a particular wine.  You’d have the opportunity to taste different wines. It’d give you options which you would have not thought of.

If interested, you can also make your own wine: choosing barrel, type of bottle, cork, the whole nine yards.

With your purchase can become a member of the “ Wine Vault Circle “, which offers the special benefits together with a state- of -art wine storage service.

Your Jammertal Wine Estate has clearly made the choice to produce great red wines. Have you not been discouraged by the difficulties you have talked about? 

If this were an easy thing, everybody would be out there to do it.

Achieving your goal to produce red wines which would belong among the top 0.5% in the world requires a certain way of living and attitude. If we want real results your work has to become part of your life whether you like it or not. There is no place for eager amateurs in this business.

We took our first steps in 2001 and the proof of the results of our efforts since then has been the many prizes won at the world’s major wine competitions over the years ( www.jbb.hu/en/awards/ ).

The biggest challenges are that solid decisions have to be made on regular basis which are often financially and personally painful. If producing great wines every tiny detail counts. The slightest error can end up in complete failure, often only years later. We should prevent mistakes from happening but if they do, they must be dealt with immediately and efficiently. Sometimes you would need to say goodbye to hundred-thousands of Euros or actual human relationships – but no pain, no gain…

https://jbb.hu/en/